High Eccentricity EOQ Total Cost Function Yields JIT Results

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Authors

Roach, Bill

Issue Date

2009-07-1

Type

Working paper

Language

en_US

Keywords

Eccentricity , Economic Order Quantity (EOQ) , Perishable inventory , Inventory control , Business logistics , Business mathematics

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Abstract

For perishable inventory, the hold cost H is much larger than anticipated by the classical EOQ formula, orders of magnitude larger. For perishable inventory, the EOQ total cost function is pointed rather than flat. This pointed-ness logically causes the EOQ model to yield JIT-like results. The pointed-ness (eccentricity) of the EOQ total cost curve depends solely on holding cost H and not annual demand D or batch cost S. D and S determine the level of the TC curve but not the shape.

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Washburn University. School of Business

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